Prudential-Bache Securities Inc. was fined $100,000 by the Chicago Mercantile Exchange for trade reporting and margin violations involving certain foreign-based accounts, the exchange said Wednesday.
An exchange hearing committee found that Prudential-Bache failed to adequately report trades and make margin payments on the overseas accounts.
Prudential-Bache agreed to settle the case without admitting or denying the alleged infractions.
Sources said that Prudential-Bache`s customers were believed to be Japanese brokerage firms that sought to reduce their margin payments by trading customer positions among themselves.
The Merc committee found that over a period of at least 15 months, Prudential-Bache permitted the accounts to simultaneously enter equal quantities of buy and sell orders daily in the exchange`s Standard & Poor`s 500 index market.
Prudential-Bache failed to adequately investigate the intent of the unusual transactions, the Merc said.
”The violations in question were quite technical in nature,” said a spokesman for Prudential-Bache.
The exchange said it would waive $25,000 of the fine if there are no similar violations by Prudential-Bache in the next year.
The Merc in April fined Clayton Brokerage Co. of St. Louis for similar violations regarding Japanese accounts.
